What Business Funding Approaches Do Businesses Apply to Acquire Loans?
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It is an open secret which should not surprise anybody that it is very hard to get a start-up business loan from a normal commercial bank. ? This is because several of these financial institutions are out there to make profits and not lose any more from a hunch or cases of unproven business. ??Therefore, if you are starting up or considering starting a business, you should come up with methods of solving this problem of acquiring a business loan from standard banks. But the main one is to ensure your business is not a start-up one although this is hard to achieve it is doable with commitment and discipline. Several businesses do not get financing as they lack a business concept, their profit margins are low, they do not have assets to act as collateral for their business loans, and finally, they require market proof.
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Today, let us look at why failure to have market proof can prohibit access to business financing. For a start, manufacturing and selling services or products to a market that is too small or none existent is not easy. ?Start-up businesses do not factor in the profitability and size of the market that they want to serve. ? It is not difficult to evaluate the market potential of different business especially if you use social media or online platforms such as Yahoo and Google where you will find several aspiring start-up businesses.
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The best suggestion is to use the principle of minimum viable product where a trial product out of your main product is sent to your target market. ??By so doing, you receive instant feedback for proof that the market is in existence and for revisions. Furthermore, you can hit the streets and pick look for interested customer to test the market. Identify a good number of people consuming your product or service and reach out to them either in person, direct mail or a phone call. ? You could make sales and also receive the much-needed feedback by doing so.
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Studies conducted in the recent past show that to gain market traction a start-up business needs 12 to 18 months. ? However, this should not be confused with testing the start-up business idea to the market. This one should not take more than 30 days, and the impact should be easily identified. So in case your minimum viable product does not gain the needed feedback and consequent sales, you can choose to re-test the product or abort the mission. Your business financing application can be strengthened using the right market proof.